The Business of Business

Expectations of the company are changing.

THE DEBATE over the role of business dates back at least a century, to the time when President Theodore Roosevelt broke the power of those "malefactors of great wealth." But today's debate is more heated than usual. Even though there is always a good argument for the notion that the business of business is business, corporations are under mounting pressure to define their goals more broadly.

"Corporate social responsibility" has become a buzz phrase, complete with a thriving industry of image gurus and responsibility consultants. Business schools feel obliged to teach tomorrow's corporate leaders about environmental sustainability and corporate ethics. As The Post reported this month, the new mood has spread even to Wal-Mart, long a champion of the profit-focused business style. Having spent years squeezing costs at the chain's suppliers, Wal-Mart's bosses are experimenting with "fair-traded" coffee, paying farmers a premium in exchange for virtuous labor and environmental practices.

Pressure on business to act "responsibly" seems to come in cycles. In the 1980s the financier Ivan Boesky told a business school audience, "You can be greedy and still feel good about yourself." Then he was jailed for insider trading, and red-meat profit-seeking fell from fashion. In the late 1990s the dot-com boom unlocked animal spirits; then Enron and its successor scandals forced a retreat to the cages. But the current interest in corporate social responsibility is more than just the latest turn in this cycle. It reflects the continuing rise of two forces: environmental and globalization concerns.

The modern environmental movement is often traced to the publication in 1962 of "Silent Spring," Rachel Carson's attack on the effects of pesticides. At first only manufacturers with obvious environmental footprints were in the firing line. But as the environmental movement has grown, almost every firm has had to think about its ecological profile: Recently banks such as Goldman Sachs have taken steps to become "carbon-neutral," while Wal-Mart has promised to double the fuel efficiency of its vehicle fleet. This spread of green virtue has acquired a sort of self-fulfilling momentum. Companies such as General Electric expect that regulatory standards on greenhouse gases will tighten, so they steal a march on their rivals by behaving as though the standards were already in place. This in turn makes the tightening more likely, since a potential member of the anti-regulatory lobby no longer has anything to lose from curbs on carbon.

The same dynamic applies to globalization. "Transnationals" came under attack during the 1970s, but the integration of the world economy has caused more firms to go global -- and to face potential criticism for it. Clothing and shoe companies have been attacked for using sweatshops; Yahoo Inc. has been attacked for complicity with China's Internet police; pharmaceutical companies have been attacked for pricing their medicines too high in poor countries. As with the environment, some businesses respond by getting out ahead. Writing in the current issue of Foreign Affairs, Samuel J. Palmisano of IBM calls on business leaders to help manage the pressures of globalization, from inadequate education to inflexible health systems.

This evolution is broadly welcome. Tightening environmental standards is part of society's progress. Business can also help manage globalization's downsides. Yet the emphasis on companies' social responsibility must be realistic. Corporate efforts to control carbon emissions or discount AIDS medicines will never be a substitute for sensible public policies on climate change or drug pricing. And even though the world has changed, earning a profit by getting excellent goods to customers at the lowest possible cost remains the central purpose of business.